Tags: Bill Gross | Fed | Hawkish | Yellen | Dove

Bill Gross: Fed 'Less Hawkish' Than Feared, Yellen a 'Dove at Heart'

(Getty/Mark Wilson)

By    |   Wednesday, 15 March 2017 03:25 PM

Billionaire bond investor Bill Gross says the Federal Reserve's policy decision to raise rates at the March FOMC meeting was “less hawkish” than many experts had feared.

“I think that today's statement was a little less hawkish than some had feared and so we're seeing rallies in stocks and bonds,” the Janus Global Unconstrained Bond Fund portfolio manager told CNBC.

The Fed raised its benchmark interest rate for the second time in three months and signaled that any further hikes this year will be gradual, the Associated Press reported. The move reflects a consistently solid U.S. economy and will likely mean higher rates on some consumer and business loans.

The Fed's key short-term rate is rising by a quarter-point to a still-low range of 0.75 percent to 1 percent. The central bank said in a statement that a strengthening job market and rising prices had moved it closer to its targets for employment and inflation.

“I think Janet Yellen fears that markets and asset prices are subject to downturns, in some cases significant downturns. So she wants to move on a gradual basis," he said.

The Fed's forecast for future hikes, drawn from the views of 17 officials, still projects that it will raise rates three times this year, unchanged from the last forecast in December. But the number of Fed officials who think three rate hikes will be appropriate rose from six to nine.

The central bank's outlook for the economy changed little, with officials expecting economic growth of 2.1 percent this year and next year before slipping to 1.9 percent in 2019. Those forecasts are far below the 4 percent growth that President Donald Trump has said he can produce with his economic program.

"She acknowledged strong employment numbers and real growth that's improving. I think Janet Yellen is basically a dove at heart and we'll see that over the next 12 to 24 months,” Gross explained.

A robust February jobs report — 235,000 added jobs, solid pay gains and a dip in the unemployment rate to 4.7 percent — added to the perception that the economy appears fundamentally strong.

However, Gross urged savvy investors to remain cautious. 

“The global economy, although it's improving, is certainly not back to great or back to where it was,” Gross said.

Although Yellen's term expires in 2018, Trump had threatened on the campaign trail to oust her.

Gross wasn't inclined to see Yellen on the unemployment line herself anytime soon.

“Trump hasn't been upfront on terms of his choices for the Fed or the potential choices but there's a tendency always for presidents to select dovish chairmen and dovish policy numbers in order to perpetuate the economic cycle for the next election," Gross said.

"I would anticipate more doves than hawks as we move along in the next 12 months.”

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Billionaire bond investor Bill Gross says the Federal Reserve's policy decision to raise rates at the March FOMC meeting was "less hawkish" than many experts had feared.
Bill Gross, Fed, Hawkish, Yellen, Dove
Wednesday, 15 March 2017 03:25 PM
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